[ET Net News Agency, 23 November 2020] HSBC Global Research lifted its target price for
Cathay Pacific (CX) (00293) to HK$6.7 from HK$6 and maintained its "hold" rating.
The research house cited management on an analysts' briefing guiding that its 2H results
will likely be weaker versus 1H on a weak recovery of passenger traffic. CX's passenger
capacity (ASK) during 1Q-3Q was 25% of 2019 levels, but CX expects 4Q capacity to be
less than 10%.
CX said that restructuring costs of HK$3.5bn will be booked in 2H, including HK$2.2bn of
employee redundancies following the elimination of 6,400 employee positions. While CX
booked impairments of HK$2.5bn in 1H (including HK$1.2bn on 16 aircraft), it said that it
will reassess carrying values at end-2020.
For 1H 2021, CX expects its ASK at less than 25% of 2019 levels, while in 2H 2021, it
expects ASK at over 50% (less than 50% for the full year 2021). CX said that cargo demand
has remained strong, and indeed returned to pre-COVID-19 levels in the US-China trade lane
due to the e-commerce boom.
HSBC raised its 2020 reported loss forecast to HK$21bn (from HK$16bn earlier) and 2021
loss to HK$6.7bn (from HK$4.1bn earlier) on sharply lower passenger traffic and
restructuring expenses. It now expects CX to turn profitable only in 2022. (KL)